TIDMENOG

RNS Number : 8328Y

Energean PLC

08 September 2022

 
Energean Israel Limited 
 Unaudited interim condensed consolidated financial statements 
 30 June 2022 
 

ENERGEAN ISRAEL LIMITED

Unaudited interim condensed consolidated financial statements

AS OF 30 JUNE 2022

INDEX

 
                                                               Page 
                                                              ----- 
 
 Interim condensed consolidated statement of financial 
  position                                                      1 
 
 Interim condensed consolidated statement of comprehensive 
  income                                                        2 
 
 Interim condensed consolidated statement of changes 
  in equity                                                     3 
 
 Interim condensed consolidated statement of cash 
  flows                                                         4 
 
 Notes to the interim condensed consolidated financial 
  statements                                                   5-16 
 

- - - - - - - - - - - - - - - - - - - -

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                   30 
                                                   June     31 December 
                                                   2022         2021 
                                               ----------  ------------ 
                                                Unaudited     Audited 
                                               ----------  ------------ 
                                       Note 
                                     -------- 
ASSETS: 
 NON-CURRENT ASSETS: 
   Property, plant and equipment       3(A)     2,584,894     2,245,267 
   Intangible assets                   3(B)        54.527        20,141 
   Other accounts receivable           6(B)            82         6,463 
   Loan to related party               6(B)             -       346,000 
   Restricted cash                    3(D)(2)           -       100,000 
   Deferred expenses                   3(C)             -        22,958 
   Deferred tax asset                    5         14,458        11,575 
                                               ----------  ------------ 
                                                2,653,961     2,752,404 
                                               ----------  ------------ 
 
 CURRENT ASSETS: 
   Trade and other receivables                     32,152        22,769 
   Deferred expenses                   3(C)        22,958             - 
   Restricted cash                    3(D)(2)     135,610        99,729 
   Cash and cash equivalents                      218,711       349,827 
                                               ----------  ------------ 
                                                  409,431       472,325 
                                               ----------  ------------ 
 
TOTAL ASSETS                                    3,063,392     3,224,729 
                                               ==========  ============ 
 
EQUITY AND LIABILITIES: 
EQUITY: 
   Share capital                                    1,708         1,708 
   Share premium                       6(B)       212,539       572,539 
   Accumulated losses                            (40,851)      (35,946) 
                                               ----------  ------------ 
   TOTAL EQUITY                                   173,396       538,301 
                                               ----------  ------------ 
 
 NON-CURRENT LIABILITIES: 
   Senior secured notes                3(D)     2,467,251     2,463,524 
   Provisions for decommissioning                  26,609        35,525 
   Trade and other payables            3(F)       160,587       113,264 
                                               ----------  ------------ 
                                                2,654,447     2,612,313 
                                               ----------  ------------ 
 
 CURRENT LIABILITIES: 
   Trade and other payables            3(F)       235,549        74,115 
                                               ----------  ------------ 
TOTAL LIABILITIES                               2,889,996     2,686,428 
                                               ----------  ------------ 
 
TOTAL EQUITY AND LIABILITIES                    3,063,392     3,224,729 
                                               ==========  ============ 
 
 
 September 7, 2022 
------------------    -----------------    ---------------- 
                       Panagiotis Benos     Matthaios Rigas 
                           Director             Director 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 30 June 2022

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                                30 June (Unaudited) 
                                                          ------------------------------- 
                                                                  2022             2021 
                                                          --------------------  --------- 
                                                    Note 
                                                   ----- 
 
    Administrative expenses                         4(A)               (5,453)    (1,735) 
    Other expenses                                  4(A)               (1,074)       (28) 
    Other income                                    4(A)                    53          - 
                                                          --------------------  --------- 
 
    Operating loss                                                     (6,474)    (1,763) 
 
    Finance income                                  4(B)                 4,504      1,808 
    Finance expenses                                4(B)               (4,671)    (9,436) 
    Foreign exchange loss                           4(B)                 (967)      (727) 
                                                          --------------------  --------- 
                                                                       (1,134)    (8,355) 
 
    Loss for the period before tax                                     (7,608)   (10,118) 
 
    Tax income                                       5                   2,703      2,571 
                                                          --------------------  --------- 
     Net loss for the period                                           (4,905)    (7,547) 
                                                          --------------------  --------- 
 
 
 Other comprehensive income (loss): 
 
 Items that may be reclassified subsequently 
  to profit or loss: 
 Gain (loss) on cash flow hedge for 
  the period                                                                 -      2,278 
Reclassification adjustment for items included 
 in loss on realisation                                                      -     4,641 
 Tax relating to items that may be 
  reclassified subsequently to profit 
  or loss                                                                    -    (1,591) 
                                                          --------------------  --------- 
 
 Other comprehensive income for the 
  period                                                                     -      5,328 
                                                          --------------------  --------- 
 
 Total comprehensive loss for the period                               (4,905)    (2,219) 
                                                          ====================  ========= 
 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2022

(Amounts in thousands US Dollars, unless otherwise stated)

For the period of six months ended 30 June 2022 (Unaudited):

 
                                    Share       Share     Accumulated     Total 
                                    capital    premium       losses       equity 
                                  ---------  ----------  ------------  ---------- 
 
 Balance as of 1 January 2022       1,708      572,539     (35,946)      538,301 
 
 Changes during period: 
 Transactions with shareholders 
 Share premium reduction, see 
  note 6(B)                           -       (360,000)        -        (360,000) 
 Comprehensive loss: 
   Loss for the period                -           -         (4,905)      (4,905) 
                                  ---------  ----------  ------------  ---------- 
 Balance as of 30 June 2022         1,708      212,539     (40,851)      173,396 
                                  =========  ==========  ============  ========== 
 
 

For the period of six months ended 30 June 2021 (Unaudited):

 
                                   Share      Share       Other     Accumulated    Total 
                                   capital    Premium    reserves      losses      equity 
                                 ---------  ---------  ----------  ------------  -------- 
 
 Balance as of 1 January 2021      1,708     572,539     (5,328)     (25,114)     543,805 
 
 Changes during period: 
 Comprehensive Income (Loss): 
   Loss for the period               -          -           -         (7,547)     (7,547) 
   Other comprehensive income, 
    net of tax                       -          -         5,328          -         5,328 
                                 ---------  ---------  ----------  ------------  -------- 
 Balance as of 30 June 2021        1,708     572,539        -        (32,661)     541,586 
                                 =========  =========  ==========  ============  ======== 
 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Six months ended 30 June 2022

(Amounts in thousands US Dollars, unless otherwise stated)

 
                                                   30 June (Unaudited) 
                                                ------------------------- 
                                                    2022         2021 
                                                -----------  ------------ 
Cash flows from operating activities: 
    Loss for the period before tax                  (7,608)      (10,118) 
                                                -----------  ------------ 
  Adjustments for: 
    Depreciation and amortisation                       110            50 
    Loss from disposal on property, plant 
     and equipment                                    1,074            23 
    Decommissioning discount unwinding                  343           343 
    Other expenses                                        -             5 
    Finance income                                  )4,504)       (1,808) 
    Finance expenses                                  4,330         9,093 
    Net foreign exchange loss                           967           727 
                                                -----------  ------------ 
                                                    (5,288)       (1,685) 
  Changes in working capital: 
    Decrease (increase) in other receivables            871         (183) 
    Decrease in trade and other payables              (310)         (932) 
                                                -----------  ------------ 
                                                        560       (1,115) 
   Income taxes paid                                  (558)             - 
                                                -----------  ------------ 
Net cash used in operating activities               (5,285)       (2,800) 
                                                -----------  ------------ 
Cash flows from investing activities: 
    Payment for purchase of oil & gas 
     leases                                               -      (10,850) 
    Payment for purchase of property, 
     plant and equipment                          (130,118)      (97,615) 
    Payment for purchase of intangible 
     assets                                        (10,034)       (3,682) 
    Proceeds from disposals of property, 
     plant and equipment                                188             - 
    Amounts received from INGL related 
     to the future transfer disposals of 
     property, plant and equipment                   17,371             - 
    Movement in restricted cash                      64,119     (266,241) 
    Interest received                                 1,544           123 
                                                -----------  ------------ 
Net cash used in investing activities              (56,930)     (378,265) 
                                                -----------  ------------ 
Cash flows from financing activities: 
  Senior secured notes issuance                           -     2,500,000 
    Transaction cost due to senior secured 
     notes issuance                                       -      (37,218) 
    Interest paid due to senior secured            (64,453) 
     notes                                                              - 
    Drawdown of borrowings                                -       118,000 
    Repayment of borrowings                               -   (1,268,000) 
    Loan to related party (*)                             -     (175,884) 
    Repayment of loan from related parties                -      (16,000) 
    Finance cost paid                               (1,869)      (41,861) 
    Finance costs paid for deferred license 
     payments                                             -       (3,494) 
    Repayment of obligations under leases             (499)         (169) 
                                                -----------  ------------ 
Net cash generated (used) from financing 
 activities                                        (66,821)     1,075,374 
                                                -----------  ------------ 
 
Net increase (decrease) in cash and 
 cash equivalents                                 (129,036)       694,309 
   Cash and cash equivalents at the beginning 
    of the period                                   349,827        37,421 
    Effect of exchange rate fluctuations 
     on cash held                                   (2,080)         (146) 
                                                -----------  ------------ 
Cash and cash equivalents at the end 
 of the period                                      218,711       731,584 
                                                ===========  ============ 
 

(*) The loan to related party was repaid as part of the Share Premium Capital reduction, see note 6(B).

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 1:    GENERAL 

A. Energean Israel Limited (the "Company") was incorporated in Cyprus on 22 July 2014 as a private company with limited liability under the Companies Law, Cap. 113. Its registered office is at Lefkonos 22, 1(st) Floor, 2064, Nicosia, Cyprus.

B. The Company and its subsidiaries (the "Group") was established with the objective of exploration, production and commercialisation of natural gas and crude oil. The Group's main activities are performed in Israel by the Company's Israeli Branch.

   C.      The Group's core assets as of 30 June 2022 are composed of: 
 
 Country                  Asset                 Working interest   Field phase 
---------  ----------------------------------  -----------------  ------------ 
   Israel     Karish (including Karish North)          100%        Development 
   Israel     Tanin                                    100%        Development 
   Israel     Blocks 12, 21, 23, 31                    100%        Exploration 
   Israel     Four licences Zone D (1)                 80%         Exploration 
 

(1) The Company holds 80% interests in four licences, blocks 55, 56, 61 and 62 (together, "Zone D") in Israel's Exclusive Economic Zone ("EEZ"). Following Energean's submission of a formal notice of relinquishment to the Ministry of Energy, the licences will expire on 27 October 2022, at the end of their term. See note 7(A).

D. The Energean Power FPSO arrived on location in Israel on 5 June 2022 and is expected to deliver first gas within a few weeks.

   NOTE 2:    ACCOUNTING POLICIES AND BASIS OF PREPARATION 

These unaudited interim condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by United Kingdom (UK). The unaudited interim condensed consolidated financial statements do not include all the information and disclosures that are required for the annual financial statements and must be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2021.

These unaudited interim financial statements have been prepared on a going concern basis.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION 
   A.      Property, Plant and Equipment: 
   1)      Composition: 
 
                                                        Furniture, 
                                 Oil & gas   Leased      fixtures 
                                 properties   assets   and equipment    Total 
                                -----------  -------  --------------  --------- 
 Cost: 
 At 1 January 2021               1,812,758     604         635        1,813,997 
 Additions (*)                    243,346     3,405        194         246,945 
 Disposals                         (23)         -           -           (23) 
 Capitalised borrowing cost 
  (**)                            188,889       -           -          188,889 
 Capitalised depreciation           362         -           -            362 
 Change in decommissioning 
  provision                       (3,549)       -           -          (3,549) 
                                -----------  -------  --------------  --------- 
 Total cost at 31 December 
  2021                           2,241,783    4,009        829        2,246,621 
 Additions (*)                    286,844      198        1,922        288,964 
 Disposals                         (900)        -           -           (900) 
 Capitalised borrowing cost 
  (**)                            60,749        -           -          60,749 
 Capitalised depreciation           357         -           -            357 
 Change in decommissioning 
  provision                       (9,259)       -           -          (9,259) 
                                -----------  -------  --------------  --------- 
 Total cost at 3 0 June 2022     2,579,574    4,207       2,751       2,586,532 
                                -----------  -------  --------------  --------- 
 
 Depreciation: 
 At 1 January 2021                   -         331         143           474 
 Charge for the year                 -          -           85           85 
 Capitalised to petroleum 
  and gas assets                     -         362          -            362 
 Write down of the assets           433         -           -            433 
                                -----------  -------  --------------  --------- 
 Total Depreciation at 31 
  December 2021                     433        693         228          1,354 
 Expensed for the period             -          -          110           110 
 Disposals                         (433)        -           -           (433) 
 Write down of the assets           250         -           -            250 
 Capitalised to petroleum 
  and gas assets                     -         357          -            357 
                                -----------  -------  --------------  --------- 
 Total Depreciation at 30 
  June 2022                         250       1,050        338          1,638 
                                -----------  -------  --------------  --------- 
 
 Net property, plant and 
  equipment at 31 December 
  2021                           2,241,350    3,316        601        2,245,267 
                                ===========  =======  ==============  ========= 
 Net property, plant and 
  equipment at 30 June 2022      2,579,324    3,157       2,413       2,584,894 
                                ===========  =======  ==============  ========= 
 

(*) The additions to oil & gas properties are primarily due to development costs for the Karish field, incurred under the EPCIC contract. Works relate primarily to the FPSO, subsea and onshore construction.

(**) Capitalised borrowing costs relate primarily to the secured senior notes.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
   2)      Cash flow statement reconciliations: 
 
                                                   30 June (Unaudited) 
                                              ------------------------------ 
                                                     2022            2021 
                                              -------------------  --------- 
 
 
Additions to property, plant and equipment                339,911    280,576 
Associated cash flows 
Payment for additions to property, 
 plant and equipment (*)                                (130,118)  (108,465) 
Non-cash movements/presented in other 
 cash flow lines 
Capitalised borrowing costs                              (60,749)  (122,175) 
Right-of-use asset additions                                (198)       (57) 
Capitalised share-based payment charge                      (109)       (65) 
Capitalised depreciation                                    (357)      (106) 
Change in decommissioning provision                         9,259      4,034 
Movement in working capital                             (157,639)   (53,742) 
 
 

(*) This amount includes US$10.85 million which was paid to the sellers of the Karish and Tanin leases during 2021.

   B.    Intangible Assets: 
   1)      Composition: 
 
                                       Exploration 
                                      and evaluation  Software 
                                          assets       license  Total 
                                     ---------------  --------  ------ 
Cost: 
At 1 January 2021                        13,799         255     14,054 
Additions                                 6,342          -      6,342 
                                     ---------------  --------  ------ 
At 31 December 2021                      20,141         255     20,396 
                                     ---------------  --------  ------ 
Additions (*)                            34,386          -      34,386 
                                     ---------------  --------  ------ 
At 31 June 2022                          54,527         255     54,782 
                                     ---------------  --------  ------ 
 
Amortisation: 
At 1 January 2021                           -           247      247 
Charge for the year                         -            8        8 
                                     ---------------  --------  ------ 
Total Amortisation at 31 December 
 2021                                       -           255      255 
                                     ---------------  --------  ------ 
Expensed for the period                     -            -        - 
                                     ---------------  --------  ------ 
Total Amortisation at 30 June 
 2022                                       -           255      255 
                                     ---------------  --------  ------ 
 
Net intangible assets at 31 
 December 2021                           20,141          -      20,141 
                                     ===============  ========  ====== 
Net intangible assets at 30 
 June 2022                               54,527          -      54,527 
                                     ===============  ========  ====== 
 

(*) Additions to exploration and evaluation assets are primarily due to geological surveys, seismic acquisition and processing and drilling activities undertaken in Block 12, offshore Israel. See also notes 6(E), 6(F).

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
   2)      Cash flow statement reconciliations: 
 
                                               30 June (Unaudited) 
                                         ------------------------------- 
                                                2022           2021 
                                         -------------------  ------- 
Additions to intangible assets                        34,386    3,738 
Associated cash flows 
Payment for additions to intangible 
 assets                                             (10,034)  (3,682) 
Non-cash movements/presented in other 
 cash flow lines 
Movement in working capital                         (24,352)     (56) 
 
 
   C.      Deferred expenses 

Deferred expenses relate to compensation of US$22.9 million that was accrued in 2021 following delays to the supply of gas from the Karish project. It is presented on the balance sheet as a current asset as it will be treated as variable consideration under IFRS 15, offsetting gas sales once gas delivery commences. First gas from the Karish project is expected within the next few weeks.

   D.      Senior secured notes: 

1) Issuance of US$2,500,000,000 senior secured notes:

On 24 March 2021 (the "Issue Date"), Energean Israel Finance Ltd (a 100% subsidiary of the Company) issued US$2,500,000,000 of senior secured notes.

The Notes were issued in four equal tranches as follows:

 
                                                           30          31 December 
                                                          June             2021 
                                                          2022 
                                                    ---------------  --------------- 
      Series            Maturity      Annual fixed 
                                        Interest 
                                          rate       Carrying value   Carrying value 
------------------  ---------------  -------------  ---------------  --------------- 
   US$ 625 million    30 March 2024         4.500%          618,741          617,060 
   US$ 625 million    30 March 2026         4.875%          616,930          615,966 
   US$ 625 million    30 March 2028         5.375%          616,107          615,451 
   US$ 625 million    30 March 2031         5.875%          615,473          615,047 
------------------                                  ---------------  --------------- 
                   US$2,500 million                       2,467,251        2,463,524 
===================================                 ===============  =============== 
 

The interest on each series of the Notes is paid semi-annually, on 30 March and on 30 September of each year.

The Notes are listed on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the"TASE").

With regards to the indenture document, signed on 24 March 2021 with HSBC BANK USA, N.A (the "Trustee"), no Indenture default or Indenture event of default has occurred and is continuing.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 

2) Restricted cash:

As of 30 June 2022, the restricted cash of the Company includes:

o Short term restricted cash of US$100 million debt payment fund that will be released upon achieving three quarters of production of 3.8 bcm/year on an annualised basis

o Short term restricted cash of US$35.6 million to cover the interest reserve account for the accrued interest of the senior secured notes till 30 June 2022.

3) Credit rating:

The senior secured notes have been assigned a Ba3 rating by Moody's and a BB- rating by S&P Global.

   E.      Fair value measurements: 

The information set out below provides information about how the Group determines the fair values of various financial assets and liabilities.

The fair values of the Group's non-current liabilities measured at amortised cost are considered to approximate their carrying amounts at the reporting date.

The carrying value less any estimated credit adjustments for financial assets and financial liabilities with a maturity of less than one year are assumed to approximate their fair values due to their short term-nature.

The fair value hierarchy of financial assets and financial liabilities that are not measured at fair value (but fair value disclosure is required) is as follows:

 
                                               Fair value hierarchy as of 
                                                      30 June 2022 
                                          ----------------------------------- 
                                                       Unaudited 
                                          ----------------------------------- 
 
                                              Level       Level       Total 
                                                1           2 
                                          -----------  ---------  ----------- 
                        Financial assets 
 
              Short term restricted cash    135,610        -         135,610 
 
  Short term trade and other receivables       -         31,741      31,741 
 
               Cash and cash equivalents    218,711        -         218,711 
                                          -----------  ---------  ----------- 
 
                                   Total     354,321     31,741      386,062 
                                          -----------  ---------  ----------- 
                   Financial liabilities 
                                  Senior 
                                 secured 
                                   notes 
                                     (*)   2,189,375       -       2,189,375 
         Trade and other payables - long 
                                    term       -        160,587      160,587 
        Trade and other payables - short 
                                    term       -        127,907      127,907 
                                          -----------  ---------  ----------- 
 
                                   Total    2,189,375    288,494    2,477,869 
                                          -----------  ---------  ----------- 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
 
                               Fair value hierarchy as of 31 December 
                                                2021 
                             ------------------------------------------ 
                                              Audited 
                             ------------------------------------------ 
                                Level 1        Level 2        Total 
                             --------------  -----------  ------------- 
Financial assets 
Long term trade and other 
 receivables                       -            6,402         6,402 
Loan to related party              -           346,000       346,000 
Long term restricted cash       100,000           -          100,000 
Short term restricted cash       99,729           -          99,729 
Short term trade and other 
 receivables                       -           22,176        22,176 
Cash and cash equivalents       349,827           -          349,827 
                             --------------  -----------  ------------- 
Total                           549,556        374,578       924,134 
                             --------------  -----------  ------------- 
Financial liabilities 
Senior secured notes (*)       2,483,750          -         2,483,750 
Trade and other payables 
 - long term                       -           59,727        59,727 
Trade and other payables 
 - short term                      -           35,918        35,918 
                             --------------  -----------  ------------- 
Total                          2,483,750       100,039      2,583,789 
                             --------------  -----------  ------------- 
 

(*) The senior secured notes are measured at amortised cost in the Company's financial statements. The notes are listed for trading on the TACT Institutional of the Tel Aviv Stock Exchange Ltd. (the "TASE")". The carrying amount as of 30 June 2022 was US$2,467 million and as of 31 December 2021 was US$2,463 million.

   F.      Trade and other payables: 
 
                                            30 June   31 December 
                                             2022        2021 
                                           ---------  ----------- 
                                           Unaudited    Audited 
                                           ---------  ----------- 
Current 
Financial items 
Trade accounts payable (1)                    90,436       32,611 
Payables to related parties                   12,057        1,079 
Deferred license payments (2)                 24,466            - 
Value added tax payable                            -        1,217 
Current lease liabilities                        948        1,011 
                                           ---------  ----------- 
                                             127,907       35,918 
 
Non-Financial items 
Accrued expenses (1)                          20,348        5,611 
Interest payable                              32,227       32,227 
Sales consideration received in advance 
 (4)                                          54,690            - 
Social insurance and other taxes                 377          132 
Income taxes                                       -          227 
                                           ---------  ----------- 
                                             107,642       38,197 
 
                                             235,549       74,115 
                                           =========  =========== 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 3:    FINANCIAL POSITION (Cont.) 
 
                                            30 June   31 December 
                                             2022        2021 
                                           ---------  ----------- 
                                           Unaudited    Audited 
                                           ---------  ----------- 
Non-current 
Financial items 
Accrued expenses to related parties              199          294 
Long term lease liabilities                    2,177        2,203 
Trade and other payables (3)                 122,579            - 
Deferred license payments (2)                 35,632       57,230 
                                           ---------  ----------- 
                                             160,587       59,727 
Non-Financial items 
Sales consideration received in advance 
 (4)                                               -       53,537 
 
                                             160,587      113,264 
                                           =========  =========== 
 

(1) Trade payables and accrued expenses relate primarily to development expenditure on the Karish project, with the main contributors being FPSO and subsea construction costs. Trade payables are non-interest bearing.

(2) In December 2016, the Company acquired the Karish and Tanin leases for US$40 million of up front consideration plus contingent consideration of US$108.5 million (paid over 10 equal instalments) bearing interest at an annual rate of 4.6%. As at 30 June 2022, the total discounted deferred consideration was US$60 million (31 December 2021: US$57million).

The Sale and Purchase Agreement ("SPA") includes provisions in the event of Force Majeure that prevents or delays the implementation of the development plan as approved under one lease for a period of more than ninety (90) days in any year following the final investment decision ("FID") date. In the event of Force Majeure, the applicable annual payment of the remaining consideration will be postponed by an equivalent period of time, and no interest will be accrued in that period of time as well.

Due to the effects of the COVID-19 pandemic which constitute a Force Majeure event, the deferred payment due in March 2022 was postponed accordingly.

(3) Amount payable to Technip in respect of the EPCIC contract. The amount is payable in eight equal instalments commencing nine-months following practical completion of the project and therefore has been discounted at 5.831% per annum.

(4) The sales consideration received in advance relates to the agreement with Israel Natural Gas Lines ("INGL") for the transfer of title (the "Hand Over") of the near shore and onshore part of the infrastructure that will deliver gas from the Energean Power FPSO into the Israeli national gas transmission grid. It is intended that the hand over to INGL will become effective at least 90 days after the delivery of first gas from the Karish field, which is expected in the next few weeks. Following Hand Over, INGL will be responsible for the operation and maintenance of this part of the infrastructure.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 4:    COMPREHENSIVE INCOME 
 
 
                                                 30 June (Unaudited) 
                                             ------------------------- 
                                                2022         2021 
                                             -----------  ---------- 
General & administration expenses 
Payroll costs                                        935         665 
Share-based payment charge included in 
 administrative expenses                              80          54 
Depreciation and amortisation (Notes 3(A) 
 and 3(B))                                           110          50 
Auditor fees                                          88         118 
Other general & administration expenses            4,240         848 
                                             -----------  ---------- 
Total administrative expenses                      5,453       1,735 
 
Other expenses 
Reversal of prior period provision                     -           5 
Loss from property, plant and equipment 
 disposal                                          1,074          23 
                                             -----------  ---------- 
Total other expenses                                 824          28 
                                             -----------  ---------- 
 
Other income 
Gain from disposal                                  (53)           - 
                                             -----------  ---------- 
Total other income                                  (53)           - 
                                             -----------  ---------- 
 
 
   A.      Operating loss: 

.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 4:    COMPREHENSIVE INCOME (Cont.) 
   B.      Net finance income (expenses): 
 
                                              30 June ) Unaudited) 
                                            ------------------------ 
                                               2022        2021 
                                            ----------  ---------- 
 
Interest on bank borrowings                          -      76,890 
Interest on senior secured notes (1)            68,179      33,791 
Interest expense on long terms payables          4,731         458 
Interest on shareholders loan                        -           9 
Less amounts included in the cost of 
 qualifying assets (2)                        (68,866)   (106,823) 
                                            ----------  ---------- 
                                                 4,044       4,325 
 
Finance and arrangement fees                     2,842      13,074 
Other finance costs and bank charges               284          29 
Interest expenses from Hedging                       -       6,988 
Unwinding of discount on decommissioning 
 liabilities                                       343         343 
Interest on obligations for leases                 160          29 
Less amounts included in the cost of 
 qualifying assets (2)                         (3,002)    (15,352) 
                                            ----------  ---------- 
                                                   627       5,111 
 
Total finance costs                              4,671       9,436 
 
Interest income from time deposits             (1,290)       (818) 
Interest income from loans to related 
 parties                                       (3,214)       (990) 
                                                        ---------- 
Total finance income                           (4,504)     (1,808) 
 
Net foreign exchange loss                          967         727 
 
Net finance loss                                1, 134       8,355 
                                            ----------  ---------- 
 

(1) See also Note 3(D)(1).

(2) See also Note 3(A).

   NOTE 5:    TAXATION 
   A.      Tax income: 
 
                                     30 June (Unaudited) 
                                   ----------------------- 
                                      2022       2021 
 
 Corporation tax - current year         (180)       (30) 
 Deferred tax income                    2,883      2,601 
                                   ----------  --------- 
 Total taxation income                  2,703      2,571 
                                   ==========  ========= 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 5:    TAXATION (Cont.) 
   B.      Deferred tax: 

Deferred taxes, driven by the activity in Israel by the Israeli Branch of the Company, are computed at an average tax rate of 23%, based on the tax rates that are expected to apply upon reversal. The deferred taxes are presented in the statement of financial position as non-current assets. Below are the items for which deferred taxes were recognised:

 
                                                                         Accrued 
                                                                        expenses 
                    Property,   Right                                   and other 
                    plant and    of                                    short--term 
                    equipment    use                                   liabilities 
                        &       asset           Deferred     Staff      and other                 Provisions 
                    intangible  IFRS     Tax    expenses    leaving    long--term   Derivative        for 
                      asset      16     losses  for tax   indemnities  liabilities   liability  decommissioning   Total 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
 
At 1 January 2021     (12,140)   (62)    9,325         -           63          293       1,591            8,769    7,839 
Increase 
(decrease) for 
the year through: 
Profit or loss           (492)  (700)    1,436     5,020           31          630           -            (598)    5,327 
Reclassification 
 for the 
 current year                -      -  (6,011)     6,011            -            -           -                -        - 
Other 
 comprehensive 
 income                      -      -        -         -            -            -     (1,591)                -  (1,591) 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
At 31 December 
 2021                 (12,632)  (762)    4,750    11,031           94          923           -            8,171   11,575 
                    ==========  =====  =======  ========  ===========  ===========  ==========  ===============  ======= 
 
Increase 
(decrease) for 
the period 
through : 
Profit or loss         (5,740)  (159)   15,461   (4,687)           43           16           -          (2,051)    2,883 
                    ----------  -----  -------  --------  -----------  -----------  ----------  ---------------  ------- 
 
At 30 June 2022       (18,372)  (921)   20,211     6,344          137          939           -            6,120   14,458 
                    ==========  =====  =======  ========  ===========  ===========  ==========  ===============  ======= 
 

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 6:    SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD 
   A.      Gas supply agreement with the Israel Electric Company 

In March 2022, Energean signed a gas supply agreement with the Israel Electric Company.

The gas price will be determined in each period, with volumes determined on a daily basis.

Starting upon the commencement of first gas production from Karish, the agreement will

be valid for an initial one-year period with an option to extend subject to ratification by

both parties

   B.       Share Premium Capital reduction: 

In April 2022 the Company reduced its share premium capital by US$360 million and credited US$346 million against the shareholder loan account plus accrued interest.

   C.      Termination of contract with Gas Buyer 

In May 2022, further to the claims raised by the parties in the related arbitration proceedings with Dalia Power Energies LTD ("Dalia") (including the counterclaim filed by the Company seeking a declaration that Company is entitled to terminate the GSPA), Dalia and the Company agreed to end all claims and disputes between the parties. Both sides agreed that the Dalia GSPA (which represents up to 0.8 bcm/year was lawfully terminated, that the arbitration proceedings were terminated, and that neither party owes or will be liable to the other for any payment in connection with and due to the Dalia GSPA, the arbitration proceedings and the facts subject thereof. This was agreed to be final and unappealable.

   D.      Contract signed with East Hagit Power Plant 

In May 2022, the Company signed a new GSPA, representing up to 0.8 bcm/year, to supply gas to the East Hagit Power Plant Limited Partnership ("EH Partnership"), a partnership between the Edeltech Group and Shikun & Binui Energy.

The GSPA is for a term of approximately 15 years, for a total contract quantity of up to 12 bcm. The contract contains provisions regarding floor pricing, offtake exclusivity and a price indexation mechanism (not Brent price linked).

   E.      Commencement of growth drilling campaign: 

The Company started its 2022 drilling campaign during March 2022, which originally included three firm wells. In June 2022, the Company exercised its contractual option to drill two further wells, the drilling locations for which were selected as the Hermes and Zeus prospects.

   F.      Athena Gas Discovery 

A commercial discovery was made by the Athena exploration well, located in Block 12, in the A, B and C sands. Preliminary analysis indicated that the Athena discovery contained recoverable gas volumes of 8 bcm on a standalone basis.

The discovery de-risked an additional 50 bcm of gross mean unrisked prospective resources across Company's Olympus Area (total 58 bcm including Athena). The Olympus Area is the Company's newly defined area which includes Athena, plus the undrilled prospects on Block 12 and the adjacent Tanin Lease.

ENERGEAN ISRAEL LIMITED

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands US Dollars, unless otherwise stated)

   NOTE 6:    SIGNIFICANTS EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD (Cont.) 
   G.      Claim submitted under the Karish-Tanin SPA 

On 31 May 2022, NewMed Energy LP (previously Delek Drilling LP) ("NewMed") filed a lawsuit against the Company before the Tel Aviv District Court. NewMed Energy LP claimed that the remaining US$65.1 million of outstanding contingent consideration due under the SPA for the Karish and Tanin leases (see Note 3(E)(2)) plus interest and indexation, should be accelerated. The residual remedy requested is US$10.85 million plus interest and indexation, reflecting the annual payment for the year 2021. The claim is purportedly based on a payment acceleration mechanism set in the SPA, combined with NewMed's rejection of the Company's Force Majeure claim. The claim is being assessed by the Company together with its legal advisors. A statement of defense will be filed mid-September.

   H.      The FPSO sailed away from Singapore and arrived on location in Israel on 5 June 2022. 
   J.        Bank Guarantee Facility: 

On 8 June, 2022 the Company's guarantee facility was extended and amended to a total of NIS355 million instead of NIS250 million. The facility is secured by Energean PLC parent company guarantee of US$112 million. This facility is valid until April 30, 2023.

   NOTE 7:    SIGNIFICANTS EVENTS AND TRANSACTIONS AFTER THE REPORTING PERIOD 
   A.       Zone D: 

On 27 July, 2022, the Company sent a formal notice to the Ministry of Energy notifing the relinquishment of Zone D and discontinuation of related work. As such, the licences are expected to expire on October 27, 2022.

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END

IR UWOVRUOUKRAR

(END) Dow Jones Newswires

September 08, 2022 11:45 ET (15:45 GMT)

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